Industry Groups Press SEC to Extend Custody Rule Comment Period

Financial services trade groups are pressing the Securities and Exchange Commission to extend the comment period on its controversial custody rule plan by 60 days.

The 12 groups — which include the Securities Industry and Financial Markets Association, the Investment Adviser Association and the Investment Company Institute — stated in a letter that the SEC plan is “broad based, complex, and technical, proposing changes that will drastically and permanently alter the custody business model and the prevailing market for custody services.”

The SEC on Feb. 15 released the plan for a 60-day comment period.

The proposal, the groups told the SEC, “would broaden the application of the current investment adviser custody rule, expanding its coverage from funds and securities to all client assets, amend the definition of qualified custodian, and make several other important changes.”

It is anticipated, the groups state, “that the proposed changes to contractual arrangements would remake the business relationships” between RIAs and qualified custodians, “between qualified custodians and retained sub-custodians (and other hired third parties), and between RIA clients and the RIAs and qualified custodians.”

RIAs and financial institutions serving as qualified custodians, the groups wrote, “will need time to vet the proposal internally and to consult with one another and with sub-custodians and other parties that will be impacted by the proposal.”

The groups add: “In light of the significance of the topic and the proposed number and magnitude of far-reaching changes, we are concerned that the existing comment deadline will not provide us with sufficient time to perform the level of analysis that this proposal warrants.”